FCCA FCCA Audit and Assurance 2

Question 1

Which of the following best describes 'materiality' in the context of an audit?

Accepted Answer

Information is material if its omission or misstatement could influence the economic decisions of users

Answer

Any error, regardless of size, that must be corrected

Answer

Only errors exceeding 10% of revenue are material

Answer

Material items are those physically large in size or volume

Question 2

An auditor discovers a significant fraud risk. Under ISA 240, what must the auditor do?

Accepted Answer

Communicate the matter to management and those charged with governance

Answer

Immediately withdraw from the engagement without explanation

Answer

Issue an adverse opinion automatically

Answer

Report directly to shareholders at the next AGM

Question 3

Which audit procedure involves the auditor physically inspecting inventory or other assets?

Accepted Answer

Observation

Answer

Confirmation

Answer

Recalculation

Answer

Analytical procedures

Question 4

Under the Sarbanes-Oxley Act (SOX) in the US, which section requires management to assess and report on internal controls over financial reporting?

Accepted Answer

Section 404

Answer

Section 201

Answer

Section 302

Answer

Section 802

Question 5

What does 'professional skepticism' mean in the context of auditing?

Accepted Answer

The auditor maintains a questioning mind and critically assesses audit evidence

Answer

The auditor assumes the client is dishonest and fraudulent

Answer

The auditor accepts all management representations without question

Answer

The auditor doubts the competence of other audit team members

Question 6

Which form of assurance engagement provides a lower level of assurance than an audit?

Accepted Answer

Review engagement

Answer

Statutory audit

Answer

Due diligence investigation

Answer

Forensic audit